That message "Firmware update is not finished correctly. Please execute firmware update again." makes it sound like you need to feed it a firmware file and let it "update" again. It may think it's stuck in the middle of an update.

If that's what it is, you'll need an update that it thinks is newer than whatever it has on it now, you can convince it that any firmware version (even the original one) is newer by following the steps that MobileReader each posted a while back:
I hope that helps, or at least gets you closer.

Just to make it a little bit more clear:

1: Download the original PRS500 updater from Sony
2: Execute this PRS500 updater and click "ok" to proceed. The installer will unpack the installation files.
3: Go to the following location on your disk: C:\Documents and Settings\[YOURUSERNAME]\Local Settings\Temp\
and copy the folder WZSE0.TMP and paste it on your desktop
4: Now you can close the PRS500 updater.
5: Go to \WZSE0.TMP\eBookUpdater\assets\updaterAssets\ on your desktop and open the file PRSVersion.dat with notepad.
6: Change 100201300 into 100201301 and save it.
7: Connect your Reader to the USB and press the reset button on the back. Don't forget to switch it back on. Wait until the Reader goes in to USB mode (wait for the USB connector icon on the Reader's screen).
8: Now execute PRS-500 Updater.exe in \WZSE0.TMP\ on your desktop
9: Follow the steps of the updater and it should upgrade your Reader and unbrick it.